Having a Delaware LLC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in Delaware.
On this page, you’ll learn about the following:
- How To Start an LLC in Delaware
- After Starting your Delaware LLC
- Delaware Foreign LLC
- Why an LLC in Delaware
- Top Delaware Businesses
- Delaware LLC Formation Review
How To Start an LLC in Delaware
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start an LLC in Delaware.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In Delaware, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the Delaware business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face many issues by avoiding focus on choosing a business name for their LLC business formation filings.
Here are some of the major benefits of choosing the best LLC names.
- Helps establish a company’s presence in the market;
- Creates a new identity that will resemble your LLC;
- Allows ease in finishing your LLC registration process;
- You can get the EIN once you have your name registration certificate
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, Delaware. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in Delaware. The cost of a name reservation is $75.
Important Quick Links:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
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Step 2: Assign a Registered Agent in Delaware
A registered agent for service is your authorized person or business entity that will act or work on your behalf. This person or business will receive significant tax forms, legal documents, legal forms, government filings, a notice of lawsuits, and other official government correspondence in Delaware. Choosing a Delaware registered agent for your LLC is required.
Make sure your registered agents are residents of Delaware. It could also be a business. Here are the recommended agents :
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Delaware. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Certificate of Formation in Delaware
A Certificate of Name Reservation is needed to file your Delaware formation certificate or what is also called Certificate of Organization. You need to make reports of this certificate with the Delaware Secretary of State for $90, which makes up the majority of the LLC cost in Delaware. That is topped with other expenses, of course.
This Certificate of Formation is a legal document that forms your business officially. It will indicate details about your LLC in Delaware, like if it is a member-managed or managers-managed.
Before you start filing your forms, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Delaware LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Create an account. You will need this to file most of your forms online. Once you have your account, choose file Articles of Organization and fill out the form completely before submitting it. To know more about online filing, visit the Delaware Certificate of Formation.
How to File by Mail
If you prefer filing hard-copy forms for your Delaware LLC registration, then you can download the Delaware Limited Company Certificate of Formation. Read the form thoroughly and fill it out. You will have to fill, among others, your name, city, state, zip code, and signature. You may also file in person by visiting the office on business days.
Mail To: Delaware Division of Corporations
401 Federal Street
Suite 4 Dover, DE 19901
Step 4: Create Your Delaware LLC Operating Agreement
An operating agreement is a document that legally outlines the proprietorship or partnership and operating procedures of your LLC. This internal document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to an LLC operating agreement Delaware does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all your details of business operation. This document would be useful if you decide to dissolve Delaware LLC later.
Step 5: Filing a Delaware LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Delaware LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your Delaware LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File Delaware business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a Delaware LLC annual report or biennial report
- Already existing LLCs that wish to operate in Delaware must register as Delaware foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Delaware Foreign LLC
To register a Delaware foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, Delaware. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check Delaware Foreign LLC to know more about having a foreign LLC.
Why an LLC in Delaware
It is always cost-effective to start an LLC in Delaware. The filing fee is fixed and it takes more if you require same-day service or expedited service. Other than that no prominent tax liabilities are there. Business taxes such as sales taxes, receipt taxes, payroll taxes, and such are less and sometimes zero in Delaware. Other than tax benefits there are business funding options and incentives that Delaware LLC receives from the government.
Business Laws are Cutthroat
The biggest and most critical aspect of running a business is that a person should abide by all the rules and regulations. Only in this case will one achieve success. The same laws and regulations must apply to the employees of the company. That is why it is best to choose LLC in Delaware.
The rules in Delaware State are stringent, due to which keeping an eye on the employees and regulating them becomes easy. Moreover, these rules make business-to-business meetings more trustworthy and reliable. If a person opens up their LLC in Delaware, then the chances of getting cheated are decreased manifolds.
Legal Bodies are Very Active
Delaware government legal bodies are more active than any other state. Also, they have the proper right to interfere if the businesses are not working in the right way. The state government will quickly solve any business issue between rivals or other similar instances.
Flexible Federal Taxes
The taxation system designed in the state is very flexible for business owners. There is the flexibility provided to the Delaware LLC in which they were given a time period to provide the taxes. Due to this, the businesses get some extra time. Moreover, there are different slabs of taxes set according to the type of business a person owns.
Formation of Series of LLCs is Allowed
Here you will get plenty of expansion opportunities. The government also allows a person to make more than one LLC for the same company. The benefit of the LLC series is that one can hire different members in the new LLC at top management. Along with that, if one series is under debt, then this debt will not affect other LLC of the series.
Top Delaware Businesses
If you are an entrepreneur and are thinking of forming an LLC in Delaware, then the very first decision you need to take is to think of a business to start with. Out of plenty of business ideas, one needs to figure out which is the best profitable niche to start a business in? So, here are the best ideas a business person can consider.
If you look at Delaware’s state, then the main business established in the state is agriculture. The backbone of the state’s economy is Agriculture. Delaware is the largest producer of corn, and its demand is increasing day by day, due to which the demand of businesses is also growing. You can easily select a product and apply it for processing that raw product, which has increased demand in the country and nearby countries.
Manufacturing of Paper Product
Paper and its products are supplied to the whole country from Delaware, and its demand is increasing day by day. That is why there is more demand for paper industries in the state. So, you can think of starting a paper industry also.
If you look at the statistics of soil present in Delaware, then the sand and gravel in the state have magnesium present in it. That is why the mining businesses are thriving well in the State of Delaware. If a businessman is looking to invest more money in business, they can take a site and start their mining. On the other hand, if one has less money to invest, one can think of manufacturing magnesium products currently in demand.
Small businesses that one can also think of starting are mentioned below.
- Dairy Farm
- Microbrewery Business
- Digital Marketing
Delaware LLC Formation Review
Time needed: 5 minutes.
To recap, here are the easy steps again when forming an LLC in Delaware. Click on the steps in this list to read the full detail.
- Name your Delaware LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In Delaware, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
If you are a resident of Delaware, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $90 (domestic LLC) and $200 (foreign LLC), LLC costs in Delaware include $300 (Franchise Tax) for Annual Reports every year. LLCs are not liable to pay any sales tax.
It takes up to 2 weeks to get a Delaware LLC if you file it online or via mail.
Every year all the LLC have to submit an Annual Report and pay $300 (Franchise Tax) to the Delaware Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
LLCs are easier to establish than other business structures. Small businesses, especially start-ups can easily start their LLC in Delaware at a bare minimum cost. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. The formation of limited liability companies requires much lesser documents and legal processes. Share your queries with us, leave a comment below.